The Commissioner of the Inland Revenue made an application dated 20 June 2011, to place Payroll Solution Services Ltd (Co. No. 1382579), directed by John M Carr CPA (see photo: http://www.carr.co.nz/images/jmc.jpg) in liquidation. The application was heard by High Court at Auckland on 5 August 2011 (CIV-2011- 404-3727). The failed company, owned by Cherokee Holdings Ltd, which is also directed by John M Carr, was placed into liquidation by the High Court pursuant to s. 241(2)(c) of the Companies Act 1993 on 2 September 2011. It was incorporated in August 2003 to provide “services to a few large clients“, according to John M Carr, as noted in the liquidator’s report dated 5 October 2011. The Liquidator, Craig Alexander Sanson, also reported:

“We were advised that the company provided services exclusively to companies related to the director [John M Carr]. The company ceased to trade in April 2011…. [Emphasis added]

“The director advised that a large payroll client ran into difficulty when they lost a customer and sufferedcash flow problems. The client was unable to pay the company [Payroll Solution Services] and subsequently the company has insufficient cash flow to meet its tax obligations. The company was liquidated on the petition of the Inland Revenue Department. [Emphasis added]

“The director advised that as at liquidation date the company held no realisable assets.”

The liquidator will no doubt want to identity the “large payroll client” John Malcolm Carr CPA refers to here that he claims lost a “customer” leading to its failure to pay for services rendered it by Payroll Solution Services Ltd, thereby causing the latter to have “insufficient cash flow to meet its tax obligations”?

Let us examine some of the possibilities:

1. PJ Digital Ltd

This is a NZ registered company which John M Carr owns and directs. and which owns a property in Freemans Bay, Central Auckland. It owns the domain name belex.co.nz and is owner of Belex Carding Co – a wool scouring machinery operation – located in Central Otago (see ref. 1). The accounts for PJ Digital Ltd were serviced exclusively by Payroll Solution Services Ltd(In liq) directed by John M Carr, up until about April 2011 when the latter ceased trading (according to Mr Carr).

PJ Digital Ltd owns the trade mark to the business Pacific Alpacas (www.pacificalpacas.com) of which John M Carr is principal agent (see ref. 2). It was through this business that John M Carr sought unsuccessfully to sell a shipping container load of about 10,000 kgs of scoured alpaca fibre worth about $100,000, to a US customer in 2011. The deal fell through about the time John M Carr told the liquidator that Payroll Solution Services Ltd ceased trading (April 2011).

The raw fibre was sourced by John M Carr and his agents from 121 New Zealand suppliers and the US order was cancelled by the customer just prior to the consignment being shipped. The fibre has subsequently been sold off to other buyers afterPayroll Solution Services Ltd is supposed to have ceased to trade (April 2011, according to Carr).

John M Carr first notified his NZ alpaca fibre suppliers on 2 June 2011 that the US customer had reneged on the 10,000 kg purchase. As a result he says he was forced to find alternative buyers for the container load of fibre and he informed all fibre suppliers on 29 December 2011 via his website www.pacificalpacas.com that he hoped to have all his creditors paid in full by the end of the first quarter of 2012. He told them that the value of the original fibre stock was $99,000, but this would probably reduce to about $94,000 when it was all finally sold. He informed them that invoices were still being issued in January 2012 to customers buying the remaining fibre.

So why has Payroll Solution Services, Ltd.directed by John M Carr, been unable to pay its creditor – IRD?

As noted, he told the liquidator it was because “the company had insufficient cash flow to meet its tax obligations… and ceased to trade in April 2011”.

If he was trying to somehow shift the responsibility away from himself as director of Payroll Solution Services Ltd and onto PJ Digital Ltd, (a possible candidate as the “large payroll client”); this makes no sense as he owns and directs the latter company. If PJ Digital Ltd was ultimately responsible for the failed sale agreement involving $100,000 worth of fibre, could this failure in itself be blamed for its lack of “cash flow” leading to the liquidation of Payroll Solution Services Ltd?

This suggestion seems implausible if the following claims made by John M Carr after April 2011, are true…

Despite having informed the liquidator that Payroll Solution Services Ltd had ceased to trade in April 2011, John M Carr had written to alpaca fibre suppliers on 2 June 2011 stating:

“The worst day of this project was Wednesday May 11th 2011…. Since then, we have sold 40% of the stock he [the US buyer who reneged] had committed to buy, have 10% on firm offer, but to five different customers at prices that were better or equal to our original budget in US dollars…

“We will provide an accounting for the prices that we have achieved by the end of June now that we have some visibility as to all the costs and realised prices for 50% of the fibre.

“Payment will be by Direct Credit. Please complete the attached form…”

In a letter to the Fibre Pool dated 4th July 2001, John M Carr wrote:

“We have sold, or got commitment for $77,000 of fibre. We have total stock valued at $99,000 – about $5,000 less than US commitment…

“We have received payment for $22,000 of the fibre as of June 30th 2011. We have sales receivable of $52,000 … and we have 6 bales … worth approximately $22,000.

“I would like to do another collection [of fibre] in the North Island in late September [2011] once the majority of the funds have been paid out.”

The domain name “pacificalpacas.com,” used by Mr John M Carr to communicate with “all participating [NZ fibre] growers” and to market his business in NZ, was registered with Godaddy.com on 2 November 2010. It is owned by a US-registered corporation Better Business Services, Inc. – PO Box 780637 San Antonio, Texas – a corporation owned and directed by John M Carr.

This brings us to the second potential “large payroll client” that John M Carr may well have been pointing the liquidator to as the culprit that caused Payroll Solution Services Ltd to be be unable to pay its taxes and consequently be put into liquidation.

2. Better Business Services, Inc.

This corporation is registered in the state of Texas (Taxpayer No. 17422888796 File No. 0067876000 SOS Reg. date 7 November 1983). It is also registered to do business in the state of Florida and John M Carr is its registered agent and principal (FEI/EIN No. 742288879. Doc. No. Po3291. Date filed 9/06/1984).

The domain name pacificalpacas.com is found at at IP address 184.172.4.10 along with the domain names: johnmcarr.combbs.co.nz and bbstax.com – and all are owned by Better Business Services, Inc./John M Carr. This strongly suggests that the John M Carr’s Pacific Alpacas business is owned or at least part-owned by Better Business Services, Inc./John Carr.

According to what John M Carr reported to the liquidator, the NZ registered company Payroll Solution Services, Ltd had no employees or assets at the time it was put into liquidation on 2 September 2011, four months after he claimed all trading operations had ceased in April 2011.

The Liquidators have since analysed the books and records of the company and have identified a claim against the director John M Carr. They state in their second report dated 26 April 2012:

“We have made demand for this claim and expect to receive a response within the next month.”

Who has made this demand?

Perhaps John M Carr has structured his convoluted company network such that the hardcore porn businesses owned by Better Business Services Inc. are all serviced by Payroll Solution Services Ltd(In liq). If so the “large payroll services client” that caused the demise Payroll Solution Services Ltd may have been Better Business Services, Inc. To put it crudely Mr John M Carr may have engineered his own downfall himself using himself as the agent!

New Zealand and US tax authorities will no doubt be very keen to establish the true nature of the relationship, if any, between Payroll Solution Services, Inc (Florida), and the NZ registered company Payroll Solution Services Ltd (In liq). The latter as noted, is fully owned by NZ-registered Cherokee Holdings Ltd, directed by John M Carr. (Cherokee Holdings Ltd is owned by The New Zealand Guardian Trust Company Ltd).

Perhaps Payroll Solution Services Inc. (Florida) was the client of Payroll Solution Services Ltd(In liq) that failed to pay its bills for services rendered by Mr John M Carr!

4. Eden Digital Ltd (In Liq) – directed by John M Carr from 23 April 2008 to 13 September 2011. (It specialises in the marketing of hard core pornography and held the licence for Erotica Lifestyles Expo. One of its former directors, Steve Crow, was banned in 2010 from being a company director for four years).

Three months after John M Carr resigned as director of Eden Digital Ltd (In Liq), the company was put into voluntary liquidation on 22 November 2011, by the actions of its shareholder – CVC Group Ltd – which has John M Carr as its sole director. The Liquidator’s first report filed on 23 November 2011, records that Eden Digital Ltd(In Liq) “has suffered cash flow problems over the last 24 months“.

Was the “large payroll client” that caused the collapse of Payroll Solution Services Ltd in fact John M Carr’s Eden Digital Ltd?

This failed hardcore porn company does seem to fit the bill and tick all the boxes with respect to its cash flow problems which have become almost legendary due to wide media coverage of its financial meltdown and the link between its director John M Carr and his “business partner” – banned company director Steve Crow.

Listed among the 22 unsecured creditors of Eden Digital Ltd(In Liq) in the Liquidator’s first report filed on 23 November 2011 are two companies owned and directed by John M Carr: PJ Digital Ltd P.O. Box 2864 Remuera, Auckland; and Better Business Services, Inc., PO Box 780637 San Antonio, USA.

Better Business Services, Inc. owns the domain names of a number of hard core porn websites linked to Eden Digital. The debt Eden Digital Ltd owes PJ Digital Ltd may relate to the use of its accomodation units in Freemans Bay, Auckland, owned by the latter, and used by Eden Digital staff and/or porn star imports performing in Erotica Lifestyle Expo events.

According to John M Carr, the “large payroll client” of Payroll Solution Services Ltd, that caused the latter’s demise, “ran into difficulty when they lost a customer and suffered cash flow problems”.

Is it possible that Eden Digital Ltd had a customer unable to clear a debt, causing it to suffer cash flow problems? Many businesses face similar difficulties in hard economic times. One only needs to look at the list of 22 unsecured creditors in the first Liquidation Report on Eden Digital to find evidence of this!

Significant Points to Note:

Better Business Services, Inc., a foreign-registered corporation, owns the Pacific Alpacas website and PJ Digital Ltd a NZ-registered company, owns the Pacific Alpacas business trade mark. Both companies are owned and directed by John M Carr. The NZ-registered company Payroll Solution Services, Ltd., (In Liq), directed by John M Carr, appears to have provided payroll services to the Pacific Alpacas business owned by John M Carr.

The company’s inability to pay its tax leading to its liquidation, came about because of “cash flow problems”, according to John M Carr, due to a “large payroll client” having its own cash flow problems. That “large payroll client” of Payroll Solution Services Ltd was most likely Eden Digital Ltd (In Liq), directed by John M Carr. Eden Digital Ltd has among its unsecured creditors PJ Digital Ltd and Better Business Services, both owned and directed by John M Carr.

Here we have the creation of a potential classic tax-avoidance loop involving the Pacific Alpacas business, Better Business Services, Inc. and PJ Digitsl Ltd, AND their owner who holds both US and New Zealand citizenship.

This arrangement can be illustrated by a parallel case set up by Mr John M Carr involving four companies he has directed for over ten years: PJ Digital Ltd, First Virtual Deposit & Nominee Company Ltd, Shelf Company No. 10 and Velocity Partners Ltd. According to NZ Company Office Records (www.companies.govt.nz), all four were owned up until 31 March 2010, by a US-registered company of which John M Carr was director and principal, called Carr Consulting P.A. (formerly named Cuchara Inc. up until 1999).

John M Carr was convicted in the Auckland District Court on 15 October 2010 for offences he had committed under the Financial Reporting Act 1993, relating to these four NZ-registered companies. He had failed to disclose to the Ministry of Economic Development that they were all foreign-owned entities and failed to file the required annual financial returns (see ref. 4).

On 20 April 2010, prior to this court case and facing ongoing investigations by the National Enforcement Office of the Ministry of Economic Development, John M Carr recorded on-line the transfer of the ownership of all four companies from John M Carr (Carr Consulting P.A.) to himself. Prior to this share transfer change, no doubt effected just prior to the end of the 2009/2010 tax year (31 March 2010), all four companies were owned by an overseas foreign entity (Carr Consulting P.A. owned by John M Carr) and under the Financial Reporting Act 1993, the director (John M Carr) of all four had been required to file Financial accounts with the Companies Office for all four. As noted, John M Carr failed to do so and was convicted in the Auckland District Court under s. 19 & 39 of the Act on 6 charges for failing to submit financial statements for these four companies. He was sentenced on 15 October 2010.

Over the period prior to March/April 2010 – the date of the share transfer – Carr Consulting P.A. (a US -registered entity) was owned by a NZ-registered company directed by John M Carr – Cheyenne Insurance Company (NZ) Limited (Co. No. 478505) which he owns. The four-fold tax-back loop he created raises serious questions for the IRD and IRS. On 27 October 2010, just days after his convictions, Mr Carr changed the name of his company Cheyenne Insurance Company (NZ) Ltd to Cheyenne Investment Company (NZ) Ltd. It had never been involved in any insurance work in New Zealand, but rather was heavily involved in property development.

Conclusion: The liquidation of Eden Digital Ltd and Payroll Solution Services Ltd have at least one common factor – the involvement of company director John Malcolm Carr. The convoluted company and business connections outlined above involving Mr John M Carr providing payroll services to his own companies, will no doubt be of considerable interest to liquidators of both companies, and creditors, the media and the New Zealand public.